Faculty of management inb 001

SHARDA UNIVERSITY UZBEKISTAN

FACULTY OF MANAGEMENT
INB 001| International business
BBA / Summer Term
Davron Akbarov
Student : FOTIMAKHON SOBIRJONOVA
CA-5
CA-COMPONENT: Case study/Assignment/survey/project/quiz/test/viva/role play/…
Date of Assigning: 6 May 2022
Date of Submission: 12 May 2022
Topic: International Trade and Investment
could have been handled in a more effective process.

1. 
   Political Motives: The main political motives behind government intervention in trade include: -Protect Jobs: Short of an unpopular war, nothing will oust a government faster than high rates of unemployment. Thus, practically all governments become involved when free trade creates job losses at home.
   

Sometimes, governments intervene in trade to achieve political motives. •Lawmakers often try to protect jobs in the domestic economy because they fear being voted out of office for high rates of unemployment. •Imports and exports in industries vital to national security receive government protection so that a country can guarantee a domestic supply in emergencies. •Another motive for intervention is to respond to the perceived unfair trade practices of another country. •And governments get involved in trade to gain influence over other nations. 3 Governments also have economic motives to intervene in trade. •The infant industry argument says that emerging industries need protection from international competition during their development. But there can be drawbacks to this policy. •First, governments may make errors in identifying the industries that are worth protecting. •Second,p , p , protection can make domestic firms less innovative, less competitive, and more likely to increase prices. •Third, this may not be the best use of public funds because small promising ventures can typically get private funding today. 4 Another economic motive for trade intervention is to pursue a strategic trade policy. •This involves government intervention to help firms gain economies of scale and first-mover advantages. •A potential benefit of a strategic trade policy is higher corporate profits resulting from solidified global market positions. •A potential drawback is that government assistance can cause corporate inefficiency and higher costs. •Assistance can also be subject to political lobbying whereby special-interest groups benefit most and consumers benefit little. 5 Governments also intervene in trade for cultural reasons. • Naturally, a culture will slowly change when it is exposed to the people and products of other countries. • Unwanted cultural influence causes great distress for a people and can force governments to block imports. • The laws of many countries protect national media programming for cultural reasons. • The United States is often seen as a threat to national cultures because of its global strength in consumer goods, entertainment, and media. 6 Recap Political motives include to protect domestic jobs, to preserve national security, to respond to “unfair” trade by another nation, and to gain influence over other nations. Economic motives include to protect infant industries from competition and to pursue strategic trade policy. And Cultural motives include to protect national identity, to block imports thought culturally harmful, and to protect budding artists. 7 Now that we understand why governments decide to promote or restrict trade with other nations, let’s take a look at each of the methods that nations use to accomplish these goals. 8 Financial assistance to domestic producers in the form of cash payments, low

2. 
   

Now that we understand why governments decide to promote or restrict trade with other nations, let’s take a look at each of the methods that nations use to accomplish these goals. 8 Financial assistance to domestic producers in the form of cash payments, lowinterest-rate loans, tax breaks, product price supports, or some other form is called a subsidy. •Although it is intended to help domestic companies fend off international competitors, a subsidy can have drawbacks. •For example, a subsidy may cover costs that a competitive industry should be able to absorb, which may encourage firms to grow inefficient and complacent. •Subsidies may benefit companies in the short term and harm consumers in the long term if governments pay for subsidies with tax revenues. 9 Governments promote exports by helping companies finance their export activities through low-interest-rate loans or loan guarantees. •Two agencies that help U.S. companies obtain export financing are the ExportImport Bank of the United States and the Overseas Private Insurance Corporation (OPIC). •The practice of financing small businesses just starting to export is widely supported. •But financing large multinational companies at taxpayer expense is criticized as corporate welfare. 10 The main goals of a foreign trade zone are to create jobs and increase trade. •Foreign trade zones reduce customs duties that typically increase production costs and lengthen the time needed to get a product to market. •Companies often use such zones for final product assembly. •Examples include the very large zones established in China’s manufacturing regions and Mexico’s maquiladora zone along its border with the United States. 11 Governments also have special agencies that promote exports through trips abroad for trade officials and businesspeople and through trade offices in other countries. •Such agencies not only promote a nation’s exports but can also encourage needed imports. 12 A geographic region within a nation and in which merchandise passes through with lower customs duties or fewer customs procedures is called a Foreign trade zones

3. 
   The three major barriers to international trade are natural barriers, such as distance and language; tariff barriers, or taxes on imported goods; and nontariff barriers. The nontariff barriers to trade include import quotas, embargoes, buy-national regulations, and exchange controls. The main argument against tariffs is that they discourage free trade and keep the principle of comparative advantage from working efficiently. The main argument for using tariffs is that they help protect domestic companies, industries, and workers.
   
4. 
   Governments three primary means to restrict trade: quota systems; tariffs; and subsidies.
   
5. 
   A quota system imposes restrictions on the specific number of goods imported into a country. Quota systems allow governments to control the quantity of imports to help protect domestic industries.
   
6. 
   Tariffs are fees paid on imported goods. Tariffs increase the price that consumers pay for the good, thus reducing the quantity of the good demanded and making the price more in line with the price charged by domestic producers. Tariff profits may go to the government or to developing industries.
   
7. 
   Subsidies are grants given to domestic industries to help them develop and compete with foreign producers. Through subsidies, domestic producers can charge less for their goods without losing money due to outside grants.
   
8. 
   Through judicious use of quotas, tariffs, and subsidies, governments are able to improve the domestic economy. This may increase the price that domestic consumers pay for goods, though this small annoyance is usually outweighed by significantly bolstered overall economic levels and long-term economic growth.
   
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